Exhibit 10.1


 


MGP INGREDIENTS, INC. SHORT-TERM INCENTIVE PLAN


 


This MGP INGREDIENTS, INC. SHORT-TERM
INCENTIVE PLAN (“Plan”) is a program for measuring financial performance in
terms of increases in Modified Economic Profit (“MEP”), and providing eligible Employees
with incentive compensation based upon MEP results.  The objective of the Plan is to encourage
initiative, resourcefulness, teamwork, motivation, and efficiency on the part
of all Participants that will result in financial success for both the stockholders
of the Company and the Participants.  The
Plan provides annual incentive compensation for eligible Employees who are in a
position to make substantial contributions toward achievement of the financial
performance goals established pursuant to the Plan. The Plan replaces the
Short-Term Incentive Plan which was first effective July 1, 2007 and which
is terminated, effective June 30, 2009.


 


SECTION 1


ESTABLISHMENT OF PLAN


 


1.1                               Plan
Document


 


This instrument, as amended from time to
time, constitutes the governing document of the Plan.


 


1.2                               Effective
Dates


 


The effective date of the Plan is July 1,
2009.  The Plan will apply for Fiscal
Year 2010 and each year thereafter, unless otherwise determined by the
Committee.


 


1.3                               Incentive
Compensation Plan


 


The Plan is an annual compensation program
for eligible Employees.  Because the Plan
does not provide welfare benefits and does not provide for the deferral of
compensation to termination of employment, it is established with the intent
and understanding that it is not an employee benefit plan within the meaning of
the employee Retirement Income Security Act of 1974, as amended.  It is intended that any award under the Plan
will not be subject to Section 409A of the Code.


 


SECTION 2


DEFINITIONS


 


The following terms shall have the definition
stated, unless the context requires a different meaning:


 


2.1                               Beneficiary


 


“Beneficiary” means the individual, trust, or
other entity designated by the Participant to receive any incentive
compensation payable to the Participant under the Plan in the event of the
Participant’s death. A Participant may designate or change a Beneficiary by
filing a signed designation with the Secretary of the Company in a form
approved by the Committee.


 

















 


If a designation has not been completed
properly and filed with the Company or is ineffective for any other reason, the
Beneficiary shall be the Participant’s Surviving Spouse. If there is no
effective designation and the Participant does not have a Surviving Spouse, the
remaining benefits, if any, shall be paid to the Participant’s estate.


 


2.2                               Board
of Directors


 


“Board” or “Board of Directors” means the
Board of Directors of the Company.


 


2.3                               Code


 


“Code” means the Internal Revenue Code of
1986, as amended.


 


2.4                               Change in Control


 


A Change in Control shall
mean:


 


(i)                                     The acquisition (other than from the Company) by any Person,
entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act (excluding, for this purpose, the Company or its subsidiaries,
any employee benefit plan of the Company or its subsidiaries, trustees of the
MGP Ingredients, Inc. Voting Trust or of the Cray Family Trust, or any
person who acquires Common or Preferred Stock from Cloud L. Cray, Jr. or
from any trust controlled by or for the benefit of Cloud L. Cray, Jr.
prior to or as a result of his death) of Beneficial Ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of at least 30%
of the then outstanding shares of common stock and 50% of the then outstanding
shares of preferred stock, par value $10 per share,  or 30% of the combined voting power of the
Company’s then outstanding voting securities entitled to vote generally in the
election of directors; or


 


(ii)                                  Individuals who, as of the date hereof, constitute the Board
(as of the date hereof the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board, provided that any Person becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating to the
election of the directors of the Company) shall be, for purposes of this Plan,
considered as though such Person were a member of the Incumbent Board; or


 


(iii)                               Approval by the stockholders of the Company of a
reorganization, merger, consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
collectively as a group more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized,  merged or consolidated company’s then
outstanding voting securities, or a liquidation or dissolution of the Company
or of the sale of all or substantially all of the assets of the Company.


 


If any of the events
enumerated in clauses (i) through (iii) occur, the Board shall 


 


2

















 


determine
the effective date of the Change in Control resulting therefrom for purposes of
the Plan.


 


2.5                               Committee


 


“Committee” means the Human Resources and
Compensation Committee of the Board of Directors and shall be comprised
entirely of Directors who are considered “outside directors” under Section 162(m) of
the Code.


 


2.6                               Company


 


“Company” means MGP Ingredients, Inc., a
Kansas corporation.


 


2.7                               Director


 


“Director” means any individual who is a
member of the Board.


 


2.8                               Employee


 


“Employee” means a salaried, full-time
Employee of the Company.


 


2.9                               Fiscal Year


 


“Fiscal Year” means the financial
reporting and taxable year of MGP Ingredients, Inc.


 


2.10                        MEP


 


“MEP” refers to Modified Economic Profit and
means adjusted net income from operations (net income from operations, plus
depreciation less capital expenditures), net of 
taxes paid during the specified Fiscal Year (“Adjusted NOPAT”), minus a
charge representing the weighted economic cost of capital (“C”)  to the Company multiplied by the sum of
average monthly total funded indebtedness plus average monthly total equity (“TC”).  The formula for determining MEP is: MEP =
Adjusted NOPAT – (C x TC).  MEP for a
Fiscal Year shall be based upon the audited financial statements of the Company
for the Fiscal Year; provided, the Committee may determine in its sole
discretion whether the calculation of MEP should include or exclude, in whole
or in part, any unusual or non-recurring item or adjusted to reflect any
unusual or non-recurring item.


 


2.11                        Participant


 


“Participant” means an Employee designated to
participate in this Plan for a Plan Year pursuant to Section 4.


 


2.12                        Plan Year


 


“Plan Year” means the Fiscal
Year of the Company, as in effect at the time.


 


3

















 


2.13                        Surviving Spouse


 


“Surviving Spouse” means the spouse of the
Participant at the time of the Participant’s death who survives the
Participant. If the Participant and spouse die under circumstances that make
the order of their deaths uncertain, it shall be presumed for purposes of this
Plan that the Participant survived the spouse.


 


SECTION 3


ADMINISTRATION OF PLAN


 


3.1                               Administration of Plan by Committee


 


The Plan shall be administered by the
Committee. The Committee shall have full discretionary authority in the
operation and administration of the Plan. The Committee must approve any award under
the Plan and, subject to the limitations set forth below, may modify any award
prior to its payment. The Committee shall act by vote or consent of a majority
of its members. To the extent necessary or appropriate, the Committee will
adopt rules, policies, and forms for the administration, interpretation, and
implementation of the Plan. The Committee may delegate administrative authority
and responsibility from time to time to and among other committees approved by
the Committee and individual Employees of the Company, but all actions taken
pursuant to delegated authority and responsibility shall be subject to review
and change by the Committee.


 


A member of the Committee or individual or
group to whom authority is delegated shall not participate in any action of the
Committee directly affecting that member, individual or group.


 


3.2                               Responsibility; Indemnification


 


The
Committee and each member thereof, and any person acting pursuant to authority
delegated by the Committee, shall be entitled, in good faith, to rely or act
upon any report or other information furnished by any executive officer, other
officer or employee of the Company or a subsidiary or affiliate, the Company’s
independent auditors, consultants or any other agents assisting in the administration
of the Plan. Members of the Committee, any person acting pursuant to authority
delegated by the Committee, and any officer or employee of the Company or a
subsidiary or affiliate acting at the direction or on behalf of the Committee
or a delegee shall not be personally liable for any action or determination
taken or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified, held harmless  and protected by the Company with respect to
any such action or determination.


 


SECTION 4


ELIGIBILITY


 


4.1                               Participation


 


An Employee shall be a Participant in the
Plan for a Plan Year upon designation as a Participant for that year by the
Committee. When deemed appropriate by the Committee, the Committee may designate
an effective date for the commencement of participation by an Employee that is
subsequent to the first day of the Plan Year.


 


4

















 


Designated Participants shall be notified in
writing and provided either a copy of the Plan or a written summary of the
Plan.


 


4.2                               Continuing Participation


 


Designation as a Participant for a Plan Year
will continue in effect for each succeeding Plan Year that the Plan is in
effect until participation is terminated by the Committee. The Committee may
terminate participation by an Employee at any time with or without cause.


 


SECTION 5


MEASUREMENT OF COMPANY
PERFORMANCE


 


5.1                               MEP Performance


 


For purposes of the Plan,
financial performance of the Company shall be measured by MEP. In general, the
Plan shall be administered so that the incentive compensation provided to a
Participant under the Plan for each Plan Year is based on improved MEP
performance relative to prior MEP performance, initially measured for the
Fourth Quarter of Fiscal 2009 ( adjusted to eliminate assets held for sale and
determined on an annualized basis).


 


5.2                               Determination of MEP


 


MEP shall be determined for each Fiscal Year
by the Committee, subject to Section 5.4.


 


5.3                               MEP
Growth Target


 


The MEP growth performance targets for each
Plan Year shall be determined by the Committee and communicated to
Participants.


 


5.4                               Adjustments


 


The Committee may determine, in its sole
discretion, whether the calculation of MEP should include or exclude, in whole
or in part, any unusual or non-recurring item or adjusted to reflect any
unusual or non-recurring item and may make such other adjustments as permitted
by Section 9.


 


5

















 


SECTION 6


INCENTIVE COMPENSATION TARGETS


 


6.1                               Target Incentive Compensation


 


The target annual incentive
compensation for each Participant for each Plan Year shall be determined by the
Committee for each Plan Year in accordance with Section 7.2(a).


 


SECTION 7


DETERMINATION AND PAYMENT OF
INCENTIVE AMOUNTS


 


7.1                               Plan Year MEP


 


MEP and MEP growth performance, including any
necessary or appropriate adjustments required or permitted hereunder, shall be
determined as soon as administratively practicable following the availability
of financial results for the Plan Year.


 


7.2                               Determination of Incentive Compensation


 


Under rules established by the
Committee, the incentive compensation for each Participant for each Plan Year
shall be calculated by the following steps:


 


(a)                                  Targeted annual incentive compensation for each Participant
for the Plan Year shall be determined based upon a point system or a percentage
of base pay, as determined by the Committee. 
If a Participant’s base pay changes during a Plan Year, proportionate
annual compensation shall be calculated, under the rules established by
the Committee, for each period of the Plan Year that each level of base pay was
in effect. The proportionate targeted incentive compensation for each level of
base pay shall be calculated by annualizing that level of base pay, multiplying
by the applicable annual incentive percentage for that level of base pay, and
then multiplying the resulting amount by a fraction, the numerator of which is
the number of days during the Plan Year that the level of base pay was in
effect and the denominator of which is the number of days in the Plan Year.


 


(b)                                 Growth in MEP shall initially be measured from MEP for the
Fourth Quarter of Fiscal Year ending June 30, 2009, as provided in Section 5.1.  The amount of actual incentive compensation
payable to Participants with respect to Fiscal Year 2010 and subsequent Fiscal
Years that the Plan is in effect  will be
determined as follows.


 


·                  If growth in MEP is less than 80% of the growth target, no
incentive compensation will be paid.


 


·                  If growth in MEP is equal to or greater than 80% and less
than or equal to 90% of the growth target, 75% of targeted incentive
compensation will be paid.


 


6

















 


·                  If growth in MEP is greater than 90% and  less than or equal to 98% of the growth
target, 85% of targeted incentive compensation will be paid.


 


·                  If growth in MEP is greater than 98% and less than or equal
to 102% of growth target, 100% of targeted incentive compensation will be paid.


 


·                  If growth in MEP is greater than 102% and less than or equal
to 110% of the growth target, 115% of targeted incentive compensation will be
paid.


 


·                  If growth in MEP exceeds 110% of the growth target, 125% of
targeted incentive compensation will be paid.


 


7.3                               Payment of Incentive Amounts


 


The
dollar amount of the annual incentive compensation for a Plan Year shall be
paid in a lump sum to the Participant as soon as feasible following the
completion of the incentive compensation calculations for the Plan Year, but in
no event later than two and one-half months following the end of the calendar
year in which occurs the end of the Company’s applicable Fiscal Year.


 


7.4                               Partial Year Participation, Employment
Changes and Forfeitures


 


(a)           Partial Year Participation.  If an Employee is
designated to become a Participant in a Plan Year as of a date other than the
first day of the Plan Year, the Participant’s incentive compensation for the
Plan Year shall be determined on the basis of the Participant’s time of
participation during the Plan Year.


 


(b)           Employment Changes.  Target incentive
percentages and incentive awards for a Participant for a Plan Year will be
prorated in the event of any change in compensation or employment status or
location, or any other change that would effect the determination for the Plan
Year, in proportion to the duration of each applicable factor during the Plan
Year.


 


(c)           Termination of Employment.  Upon termination of
a Participant’s employment during a Plan Year for any reason, the Participant
shall not be entitled to the payment of incentive compensation for the Plan
Year.  Notwithstanding the preceding
sentence, the Committee shall have full discretion to determine that payment of
a prorated annual component may be made when termination of the Participant’s
employment results from job elimination, reduction in work force or other
similar Company initiative or is otherwise without cause, or is encouraged or
induced by incentives offered by the Company.


 


7

















 


SECTION 8


CHANGE IN CONTROL


 


Upon a Change
in Control, the Plan shall terminate. 
The Committee will determine MEP on an annualized basis, based on the
Company’s performance through the most recently completed fiscal quarter for
which financial results are available. 
Incentive compensation will be paid on a pro rata basis (measured
through the end of such fiscal quarter) 
in accordance with the guidelines set forth in Section 7.2(b).


 


SECTION 9


COMMITTEE DISCRETION


 


The Committee shall exercise all of its power
and duties as the Committee deems appropriate in its sole and absolute
discretion. All decisions of the Committee shall be final and binding on all
Participants and their respective heirs and representatives. In the event it is
determined, in the judgment and discretion of the Committee, that any factor
applicable in the ultimate determination of incentive compensation under the
Plan for a Plan Year is not appropriate with respect to one or more
Participants due to unusual events, unforeseen circumstances, or other factors deemed
material and relevant, the applicable factor or the amount of the resulting
incentive compensation may be adjusted or modified in any manner deemed
appropriate by the Committee.


 


SECTION 10


AMENDMENT AND TERMINATION


 


The Plan may be amended in
any manner or terminated at any time by action of the Board of Directors.


 


SECTION 11


GENERAL PROVISIONS


 


11.1                        Benefits Not Guaranteed


 


Neither the establishment
nor maintenance of the Plan nor participation in the Plan shall provide any
guarantee or other assurance that incentive compensation will be payable under
the Plan. The success of MGP Ingredients, Inc., as determined hereunder,
and adjusted as provided herein, and application of the administrative rules and
determinations by the Committee shall determine the extent to which
Participants are entitled to receive incentive compensation payments hereunder.


 


8

















 


11.2                        No Right to Participate


 


Nothing in this Plan shall
be deemed or interpreted to provide a Participant or any non-participating
Employee with any contractual right to participate in or receive benefits of
the Plan. No designation of an Employee as a Participant for all or any part of
a Plan Year shall create a right to incentive compensation or other benefits of
the Plan for any other Plan Year.


 


11.3                        No Employment Right


 


Participation in this Plan shall not be
construed as constituting a commitment, guarantee, agreement, or understanding
of any kind that the Company will continue to employ an individual, and this
Plan shall not be construed or applied as any type of employment contract or
obligation. Nothing herein shall abridge or diminish the rights of the Company
to determine the terms and conditions of employment of any Participant or other
employee or to terminate the employment of any Participant or other Employee
with or without cause at any time.


 


11.4                        No Assignment or Transfer


 


Neither a Participant nor any beneficiary or
other representative of a Participant shall have any right to assign, transfer,
attach, or hypothecate any incentive compensation amount or credit, potential
payment, or right to future payments of any incentive compensation amount or
credit, or any other benefit provided under this Plan. Payment of any amount
due or to become due under this Plan shall not be subject to the claims of
creditors of the Participant or to execution by attachment or garnishment or
any other legal or equitable proceeding or process.


 


11.5                        Withholding and Payroll Taxes


 


The Company shall deduct from any payment
made under this Plan all amounts required by federal, state, and local tax laws
to be withheld and shall subject any payments made under the Plan to all
applicable payroll taxes and assessments.


 


11.6                        Incompetent Payee


 


If the Committee determined
that a person entitled to a payment hereunder is incompetent, it may cause
benefits to be paid to another person for the use or benefit of the Participant
or the Participant’s Beneficiary at the time or times otherwise payable
hereunder, in total discharge of the Plan’s obligations to the Participant or
Beneficiary.


 


11.7                        Section 409A


 


It is intended that the Plan and awards
issued hereunder will be exempt from Section 409A of the Code (and any
regulations and guidelines issued thereunder) because the Plan and the awards
do not provide for the deferral of compensation, and the Plan and such awards
shall be interpreted on a basis consistent with such intent. The Plan and any
award agreements issued thereunder may be amended in any respect deemed by the
Board or the Committee to be necessary in order to preserve exemption with Section 409A
of the Code.


 


9

















 


11.                               Governing Law


 


The provisions of the Plan
shall be construed and governed under the laws of the State of Kansas.


 


11.9                        Construction


 


The singular
includes the plural, and the plural includes the singular, and terms connoting
gender include both the masculine and feminine, unless the context clearly
indicates the contrary. Capitalized terms, except those at the beginning of a
sentence or part of a heading, have the meaning defined in the Plan.


 


SECTION 11


EXECUTION


 


IN WITNESS WHEREOF, MGP Ingredients, Inc.
has caused this Plan to be executed by its duly authorized officer this 10th of
December, 2009.


 


	
   

  	
  MGP
  INGREDIENTS, INC.

  
	
   

  	
   

  
	
   

  	
  /s/
  Timothy W. Newkirk

  
	
   

  	
  By:
  Timothy W. Newkirk

  
	
   

  	
  Title:
  President and CEO

  



 


10